What Is a Corporate CEO Worth?

CEO resignations are big news on Wall Street. They usually provide the opportunity to figure out how markets value what a CEO is worth to stockholders. Vikram Pandit’s resignation from Citigroup (NYSE:C) isn’t an exception to this rule.

The problem, however, is that markets couldn’t make up what Mr. Pandit is worth. Initially, they did come up with roughly $2 billions. That’s how much Citigroup’s stock dropped in premarket trading, following the announcement of his resignation. By the time the market closed, however, the prize was –$1 billion as the stock rallied by 1 percent!

In late August, markets offered us another good glimpse of what executives are worth in two other companies, Zynga and WellPoint. When Zynga’s (NASDAQ:ZNGA) Chief Executive Creative Officer Mike Verdu left the company, the company’s stock tumbled close to 3 percent, shaving off $68 millions of its market capitalization. By contrast, when WellPoint’s (NYSE:WLP) CEO Angela Braly stepped down on the same day, the company’s stock soared, adding close to one billion to shareholder value!

The problem with this valuation method, however, is that not all companies are public. So we cannot figure out what happen to the value of their equity after a key executive departs (American voters, for instance, may wish to know what happened to the market capitalization of Bain Capital after Presidential candidate Mitt Romney departed from the company). Some corporate executives have yet to depart their companies—Cisco (NASDAQ:CSCO) investors maybe curious to find out what will happen to the stock of Cisco Systems when John Chambers departs.